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Improved Revenue and Occupancy Rates in North San Diego County
in California Fueling a Wave of Hotel Construction

By Pat Maio, North County Times, Escondido, Calif.McClatchy-Tribune Regional News

May 08, 2011--OCEANSIDE -- The hotel industry isn't quite back to its boom times before the Great Recession, but improved revenue and occupancy rates are helping to fuel a wave of hotel construction in coastal North San Diego County cities.

Hotel hot spots for construction include tourist destination cities Oceanside and Carlsbad -- near LegoLand California theme park and the Pacific Ocean -- and secondary markets lined up along the 78 Highway, including San Marcos and Vista.

The time is ripe to build, as construction costs are as much as a third below what they were before the recession, one hotel developer recently said.

"They aren't seeing it (a return) yet, but they (developers) are anticipating it in the next five years," said veteran hotelier Bob Rauch of R.A. Rauch & Associates Inc., a San Diego-based hotel management company.

"We'll see growth in occupancy and revenue," said Rauch, pointing to early 2014 as the period when the industry will get to levels seen before the recession.

"Things are definitely getting better. We are off of the bottom," agreed Alan X. Reay, president of Irvine-based Atlas Hospitality Group Inc. "We are starting to see, in North County, new development going on."

Tourists also are coming back to fill up rooms.

The San Diego Convention and Visitors Bureau estimates roughly 19,138 hotel rooms in North County. Another 1,100 rooms are in various stages of construction over the next few years, according to figures provided by developers.

"We are seeing an uptick in visitors," said Leslee Gaul, president and chief executive of the Visit Oceanside Conference & Visitors Bureau. The California Welcome Center along North Coast Highway saw the numbers of visitors rise 29 percent in 2010 to 90,121. They spent more than $23.8 million in Oceanside, supporting at least 400 jobs, according to an analysis that Gaul plans to release Friday at the city's annual summit for local civic leaders to kick off the beginning of tourist season.

Hotel financials seem to be improving.

Occupancy rates for San Diego County hotels stood at 75.58 percent in March versus 73.55 percent in the same 2010 month, according to figures provided by PKF Consulting USA in Los Angeles.

Revenue per available room, or RevPar in industry parlance, is used to measure hotel performance. It is measured by looking at how many rooms are occupied and the average room rate per night.

RevPar in San Diego County rose to $116.15 in March versus $105.39 in the year-earlier month.

Temecula also is seeing growth. Occupancy rates in Temecula rose to 67.84 percent in March from 63.35 percent a year ago while RevPar rose to $60.69 from $53.75.

The improved financials are helping fuel hotel construction.

In Oceanside, three hotels are in various stages of construction.

Last August, a Hyatt Place hotel was approved by the city for developer Shantu Patel to build a 127-unit hotel, a 3,000-square-foot restaurant and 24 condominiums at 1103-1105 N. Coast Highway.

Patel, who was not immediately available for comment on when construction might begin, had planned to raze the several-decades-old Rodeway Inn and Flying Bridge restaurant to pave the way for the project.

In recent weeks, he had pulled down the signage of the hotel, formerly a Guesthouse Inn, and joined the Rodeway Inn chain of economy-priced motels, a brand of the Choice Hotels Group.

Patel's proposed hotel would be situated on a nearly 3-acre bluff overlooking the Oceanside Harbor and the Pacific Ocean.

"The project has been approved, but I have not seen the construction drawings," said Shan Babick, associate planner in the city's economic and development department. "A lot of this depends on financing, and what deal they've put together."

A second Oceanside hotel, with the help of a group of former and current major league baseball players, is to be built in the heart of town. Hotel developer Robert Olson, chief executive and president of Irvine-based R.D. Olson Development, has assembled the players and other investors to build a $25 million Courtyard by Marriott. The hotel is under construction in an area sandwiched by the Ocean Ranch business park on one side and the 465-acre El Corazon park on the other, at Oceanside Boulevard and Rancho del Oro Drive. Olson hopes to complete construction on the 140-room hotel next year.

In June 2009, the City Council approved the $209 million Oceanside Beach Resort project proposed by developer S.D. Malkin Properties of San Diego. The resort is planned for two city-owned blocks near the Oceanside Municipal Pier and will include a 289-room Westin or Hyatt hotel, 48 time shares, a 47-room boutique hotel and 18,500 square feet of commercial space.

Malkin's portfolio includes the Hilton hotel in San Diego's Gaslamp Quarter and a luxury shopping center along Rodeo Drive in Beverly Hills.

"We are still very much working cooperatively with the city to try to advance the Oceanside beach resort," said Jeremy Cohen, senior vice president of S.D. Malkin. "There has generally been a lack of financing for large-scale $150 (million)- to $200 million-type of projects, like the one that has been envisioned," Cohen said. "We are very optimistic and working with the city to make sure that the project stays on track and happens as soon as it can."

To get the project under way, Cohen's group is kicking in some of its own equity, and is seeking a $130 million construction loan, plus $27 billion in bond financing from the city's redevelopment agency. However, California Gov. Jerry Brown has proposed eliminating redevelopment agencies as part of a broader plan to trim the state's budget deficit.

"We're recovering from the worst financial crisis since the Great Depression. It's too premature to say, but I think that there is as much difficulty in Oceanside with a bond issue as there would be with construction lending," Cohen said. "This project is not abandoned. It's a project that simply is waiting for the capital markets to fund it."

Jane McVey, the city's economic and community development director, said the council recently gave the developer until mid-2012 to begin construction, along with an optional 6-month extension should it be needed.

Other hotels in various stages of construction include:

-- In Carlsbad, construction began on the first full-service resort and spa hotel in the United States since 2008. The 215-room luxury hotel, called the Hilton Carlsbad Oceanfront Resort & Spa, will be built near Carlsbad Boulevard and Ponto Drive. Bill Canepa, the lead partner, said his partnership group hopes to complete construction on the $75 million project by June 2012.

-- In Vista, a developer broke ground in January on a Hyatt Place hotel on South Melrose Drive that is expected to open in April 2012. The hotel project, at Melrose Drive just south of Faraday Avenue, will feature 150 rooms. Last July, TownePlace Suites by Marriott opened with 94 rooms, each with a full kitchen, near Sycamore Avenue.

-- In Escondido, developer Craig Clark of Rancho Santa Fe wants to build a seven-story luxury hotel in the heart of downtown -- between City Hall and the California Center for the Arts, Escondido. Financing problems on the $70 million, 200-room hotel have put the project in jeopardy.

Call staff writer Pat Maio at 760-740-3527.


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Copyright (c) 2011, North County Times, Escondido, Calif.

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